Intel May Drop Prices for Core i5 ULV to Push Ultrabooks

Intel may be bowing to the pressure of system vendors and reducing the price of some low-power processors to enable lower ultrabook prices.

Williams Financial Group analyst Cody Acree told clients that the process manufacturer could be dropping the tray prices of Core i3 CPUs by about $25 to $27. At this time, Intel currently offers three ULV i5 chips that sell for prices between $225 (i5-3427U) and $250 (i5-2557M and i5-2537M), which means that the analyst is anticipating a price drop of about 10 percent.

His reasoning stems from an increasing threat from AMD-based "Sleekbooks", which are hitting the price target of $700 and below much faster than Intel's Ultrabooks. Ultrabook makers have been complaining about the high cost of Intel processors preventing them from bringing down their bill of materials (BOM) and delivering on the $700 retail price goal. To achieve that goal, the BOM has to land somewhere between $500 and $550.

Acree's colleague Stacy Rasgon of Bernstein Research dismissed concerns that there is an "execution risk" on AMD's side and noted that AMD is becoming financially much more reliable, which indicates that we could once again be seeing a much more competitive AMD. Acree showed a considerable focus on Sleekbook pricing and the potential success. If he is right and AMD is able to piggyback on Intel's Ultrabook campaign with much cheaper same-class devices, Intel may, in fact, be forced bring its processor prices down and compromise on its comfortable margins today.